Starbucks Reports Second Quarter Fiscal 2009 Results EPS of $0.03; Non-GAAP EPS (Excluding Restructuring) of $0.16 SEATTLE--(BUSINESS WIRE)--Apr. 29, 2009-- Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its second quarter ended March 29, 2009. Fiscal Second Quarter 2009 Highlights: Net revenues of $2.3 billion, a decrease of 7.6 percent Comparable store sales of negative eight percent; compared to negative nine percent in Q1 2009 Cost reduction of approximately $120 million versus target of $100 million EPS of $0.03; Non-GAAP EPS (excluding restructuring) of $0.16 During the second quarter, we began to see signs of traction from the cost reduction and customer-facing initiatives we ve undertaken over the past year, said Howard Schultz, chairman, president and ceo. Our focus on delivering value while staying true to the premium quality and values of the brand, is paying off, added Schultz. Our recent introduction of Starbucks VIA TM Ready Brew is a notable case in point and is showing significant promise in multiple channels. We are encouraged by the progress we have made to date on our cost saving initiatives, which has resulted in non- GAAP operating margin stabilization, commented Troy Alstead, executive vice president and cfo. We are building a healthier and more sustainable business model to support the company into the future and deliver value to our shareholders. For the second quarter of fiscal 2009, consolidated revenues were $2.3 billion compared with $2.5 billion for the second fiscal quarter of 2008, primarily driven by an eight percent decline in comparable store sales due to a five percent decline in the number of customer transactions and a three percent decrease in the average value per transaction. Restructuring charges due to store closures, lower valuation of corporate real estate, and a reduction in non-retail positions impacted operating income and operating margin in the second fiscal quarter by $152.1 million and 650 basis points, respectively. As a result, for the 13 weeks ended March 29, 2009, operating income was $40.9 million and operating margin was 1.8 percent compared with operating income of $178.2 million and operating margin of 7.1 percent for the second fiscal quarter of 2008. On a non-gaap basis (excluding restructuring charges), second fiscal quarter 2009 operating income was $193.0 million and operating margin was 8.3 percent. These amounts compare with non-gaap operating income of $213.3 million and non-gaap operating margin of 8.4 percent for the second fiscal quarter of 2008. Non-GAAP amounts in the second quarter of fiscal 2008 exclude $35.1 million of costs specifically related to the company s transformation efforts, which were initiated in January 2008. Net earnings for the second quarter of fiscal 2009 were $25.0 million compared with $108.7 million for the same period a year ago. Diluted earnings per share for the second quarter of 2009 was $0.03 versus $0.15 for the 13 weeks ended March 31, 2008. Non-GAAP net earnings for the second quarter fiscal 2009 were $121.1 million and non-gaap EPS was $0.16. This compares with non-gaap net earnings of $130.9 million and non-gaap EPS of $0.18 for the same period a year ago, which excludes $35.1 million or $0.03 per share in transformation-related costs. Cost Reduction Initiatives Starbucks continues to make good progress on its fiscal 2009 target to reduce costs by $500 million. In the second quarter of fiscal 2009, the company delivered $120 million in cost savings, exceeding the targeted $100 million for the second quarter, and resulting in year-to-date cost savings of approximately $195 million. Starbucks expects to deliver cost savings of approximately $150 million in the third quarter, and approximately $175 million in the fourth quarter of fiscal 2009. Restructuring Charges Restructuring charges of $152.1 million for the quarter were primarily due to asset impairments, lease exit, and other costs associated with the closure of 123 U.S. company-operated stores, which accounted for $102.7 million of restructuring charges. The balance of the restructuring charges was attributable to severance charges related to the global workforce reduction of non-store partners announced on January 28, 2009, and the associated revaluation of corporate real estate facilities, as well as store impairment charges for International stores identified for closure. Starbucks actions to rationalize its global store portfolio have included the July 2008 and January 2009 announcements
of plans to close a total of approximately 800 company-operated stores in the U.S., restructure its Australia market and close 61 stores, and close approximately 100 other company-operated stores internationally. Since those announcements, 507 U.S. stores and 64 International stores have been closed. The majority of the remaining store closures are expected to occur by the end of fiscal 2009, and the related lease exit costs are expected to be recognized concurrently with the actual closures. YTD Financial Results For the 26 week period ended March 29, 2009, consolidated net revenues declined 6.5 percent to $4.9 billion, compared with $5.3 billion for the first half of fiscal 2008. Restructuring charges associated with the store closures and workforce reductions in positions impacted operating income and operating margin for the first half of fiscal 2009 by $227.6 million and 460 basis points, respectively. As a result, for the fiscal year-to-date period ended March 29, 2009, operating income was $158.6 million and operating margin was 3.2 percent. Non-GAAP operating income and non-gaap operating margin, which exclude restructuring charges, were $386.2 million and 7.8 percent for the first half of fiscal 2009, respectively. This compared with non-gaap operating income of $546.4 million and non-gaap operating margin of 10.3 percent for the first half of fiscal 2008, each of which excluded transformation-related costs totaling $35.1 million. Net earnings totaled $89.3 million and EPS was $0.12 for the 26-weeks ended March 29, 2009, versus $316.8 million and $0.43, respectively, for the same period a year ago. Excluding restructuring charges, non-gaap net earnings were $234.2 million and non-gaap EPS was $0.32 for the first half of fiscal 2009. This compares with non-gaap net earnings of $339.0 million and non-gaap EPS of $0.46 for the same period a year ago, which excludes $35.1 million, or $0.03 per share, in transformation-related costs. U.S. Segment Results For the second quarter of fiscal 2009, U.S. total net revenues were $1.8 billion, a decline of $131.5 million, or 6.8 percent, due to decreased revenues from company-operated retail stores. U.S. comparable store sales declined eight percent, due to a five percent decline in the number of transactions and a three percent decrease in the average value per transaction. Specialty revenues declined 3.9 percent to $202.6 million, driven by softer foodservice revenues. For the second quarter, the U.S. segment produced operating income of $90.6 million, compared with $193.9 million for the same period a year ago. Operating margin was 5.0 percent of related revenues for the second quarter fiscal 2009 compared with 10.0 percent in the corresponding period of fiscal 2008. This decrease was driven by restructuring charges of $106.8 million recorded in the period, which had a 590 basis point impact. Excluding restructuring charges, U.S. segment non-gaap operating margin for the second quarter of fiscal 2009 was 10.9 percent versus non-gaap operating margin of 11.5 percent for the same period a year ago, which excludes transformation-related costs. As a percent of total revenues, cost of sales including occupancy costs increased to 42.3 percent during the second quarter of fiscal 2009, compared with 41.4 percent for the prior-year period, due to both higher occupancy costs resulting from the impact of deleverage, and higher beverage costs as a result of new product innovations and higher coffee costs. Partially offsetting this increase was lower other operating expenses, which decreased 60 basis points to 2.3 percent of total revenues, primarily due to the reduction in force within our Specialty operations. International Segment Results International total net revenues were $433.7 million for the 13 weeks ended March 29, 2009, down $59.7 million, or 12.1 percent, compared with the same period last year, primarily due to the impact of a stronger U.S. dollar relative to the British pound and Canadian dollar. Also contributing to the decrease in International revenues was a three percent decline in comparable store sales, due to a two percent decline in the number of transactions and a one percent decrease in the average value per transaction. The UK and Canadian markets reported negative comparable store sales for the quarter. International operating income decreased to $6.0 million for the second quarter of fiscal 2009 versus $17.8 million for the same period a year ago, with the related operating margin contracting 220 basis points to 1.4 percent of related revenues, from 3.6 percent in the second quarter of fiscal 2008. This decrease was driven by restructuring charges of $14.9 million recorded in the period, which had a 340 basis point impact. Excluding restructuring charges, non-gaap operating margin for the second quarter of fiscal 2009 was 4.8 percent versus non-gaap operating margin of 5.1 percent for the same period a year ago, which excludes transformation-related costs. Global Consumer Products Group Segment Results Global Consumer Products Group (CPG) total net revenues decreased by two percent to $94.8 million for the second
quarter of fiscal 2009, due primarily to lower margin on sales of packaged coffee as a result of discounting, as well as lower volume to the trade. Operating income for the CPG segment increased to $45.3 million for the 13 weeks ended March 29, 2009, a six percent increase over the $42.7 million reported for the second quarter of fiscal 2008. Operating margin increased 350 basis points to 47.8 percent of related revenues from 44.3 percent for the prior year period. This increase was due primarily to lower income from equity investees in the second quarter fiscal 2008 resulting from product write-offs within the North American Coffee Partnership in that period. Balance Sheet and Cash Flows For the 26-week period ended March 29, 2009, cash flow from operations was $715 million, compared with $765 million for the same period in fiscal 2008, while capital expenditures for the first half of fiscal 2009 declined to $237 million versus $505 million for the prior-year period. Free cash flow for the 26 weeks ended March 29, 2009 was $479 million and was used to reduce short-term debt. Starbucks defines free cash flow as cash flow from operations less capital expenditures. At the end of the second quarter of fiscal 2009, Starbucks short-term borrowings were $226 million, and cash, cash equivalents, and short-term investments totaled $295 million, $69 million in excess of the company s shortterm borrowings balance. Fiscal 2009 Targets Starbucks now expects to add approximately 20 net new stores to its global store base in fiscal 2009. This revised target includes a net reduction of approximately 425 company-operated stores in the U.S. and the net addition of approximately 60 company-operated stores internationally. The company now expects to open approximately 65 net new licensed stores in the U.S. and approximately 320 net new licensed stores internationally. Capital expenditures for fiscal 2009 remain unchanged, at approximately $600 million. Additionally, as announced in March, Starbucks fiscal year 2009 cash from operations is expected to exceed $1 billion, with resulting free cash flow in excess of $500 million. Conference Call Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, president and ceo, and Troy Alstead, executive vice president and chief financial officer. The call will be broadcast live over the Internet and can be accessed at the company s web site address of http://investor.starbucks.com. A replay of the call will be available via telephone through 9:00 p.m. Pacific Time on Friday, May 1, 2009, by calling 1-800-642-1687, reservation number 61843632. A replay of the call will also be available via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific Time on Friday, May 29, 2009, at the following URL: http://investor.starbucks.com. The company s consolidated statements of earnings, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications. This information should be reviewed in conjunction with this press release. Please refer to the company s Annual Report on Form 10-K for the fiscal year ended September 28, 2008 for additional information. About Starbucks Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at www.starbucks.com. Forward-Looking Statements This release contains forward-looking statements relating to certain company initiatives and plans, as well as trends in or expectations regarding, the expected effects of restructuring and other initiatives, store openings and closings, cost savings, restructuring charges, cash from operations, capital expenditures and free cash flow. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to a number of significant risks and uncertainties. Actual future results may differ materially depending on a variety of factors including, but not limited to, coffee, dairy and other raw material prices and availability, successful execution of the company s restructuring and other initiatives, fluctuations in U.S. and international economies and currencies, the impact
of competition, the effect of legal proceedings, and other risks detailed in the company filing with the Securities and Exchange Commission, including the Risk Factors section of Starbucks Annual Report on Form 10-K for the fiscal year ended September 28, 2008. The company assumes no obligation to update any of these forward-looking statements. STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Net revenues: 13 Weeks Ended 13 Weeks Ended Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 (in millions, except per share data) As a % of total net revenues Company-operated retail $ 1,961.8 $ 2,142.9 (8.5) % 84.1 % 84.8 % Specialty: Licensing 282.8 274.4 3.1 12.1 10.9 Foodservice and other 88.7 108.7 (18.4) 3.8 4.3 Total specialty 371.5 383.1 (3.0) 15.9 15.2 Total net revenues 2,333.3 2,526.0 (7.6) 100.0 100.0 Cost of sales including occupancy costs 1,043.5 1,106.7 (5.7) 44.7 43.8 Store operating expenses 819.6 927.1 (11.6) 35.1 36.7 Other operating expenses 64.0 82.8 (22.7) 2.7 3.3 Depreciation and amortization expenses General and administrative expenses 134.1 138.1 (2.9) 5.7 5.5 104.3 117.6 (11.3) 4.5 4.7 Restructuring charges 152.1 0.0 nm 6.5 - Total operating 2,317.6 2,372.3 (2.3) 99.3 93.9
expenses Income from equity investees 25.2 24.5 2.9 1.1 1.0 Operating income 40.9 178.2 (77.0) 1.8 7.1 Interest income and other, net 2.9 0.2 nm 0.1 - Interest expense (8.9) (11.2) (20.5) (0.4) (0.4) Earnings before income taxes 34.9 167.2 (79.1) 1.5 6.6 Income taxes 9.9 58.5 (83.1) 0.4 2.3 Net earnings $ 25.0 $ 108.7 (77.0) 1.1 % 4.3 % Net earnings per common share - diluted Weighted avg. shares outstanding - diluted $ 0.03 $ 0.15 (80.0) % 739.9 739.3 Supplemental Ratios: Store operating expenses as a percentage of Companyoperated retail revenues Other operating expenses as a percentage of specialty revenues 41.8 % 43.3 % 17.2 % 21.6 % Effective tax rate 28.4 % 35.0 % STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) 26 Weeks Ended 26 Weeks Ended
Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 (in millions, except per share data) As a % of total net revenues Net revenues: Company-operated retail $ 4,138.0 $ 4,494.4 (7.9) % 83.6 % 84.9 % Specialty: Licensing 617.1 579.2 6.5 12.5 10.9 Foodservice and other 193.4 220.0 (12.1) 3.9 4.2 Total specialty 810.5 799.2 1.4 16.4 15.1 Total net revenues 4,948.5 5,293.6 (6.5) 100.0 100.0 Cost of sales including occupancy costs 2,240.3 2,292.7 (2.3) 45.3 43.3 Store operating expenses 1,756.2 1,854.4 (5.3) 35.5 35.0 Other operating expenses 136.6 168.5 (18.9) 2.8 3.2 Depreciation and amortization expenses 268.4 271.3 (1.1) 5.4 5.1 General and administrative expenses 209.5 243.5 (14.0) 4.2 4.6 Restructuring charges 227.6 - nm 4.6 - Total operating expenses 4,838.6 4,830.4 0.2 97.8 91.2 Income from equity investees 48.7 48.1 1.2 1.0 0.9 Operating income 158.6 511.3 (69.0) 3.2 9.7 Interest income and other, net (3.5) 10.9 nm (0.1) 0.2 Interest expense (21.9) (28.3) (22.6) (0.4) (0.5) Earnings before income taxes 133.2 493.9 (73.0) 2.7 9.3 Income taxes 43.9 177.1 (75.2) 0.9 3.3 Net earnings $ 89.3 $ 316.8 (71.8) 1.8 % 6.0 % Net earnings per common share - diluted Weighted avg. shares outstanding - diluted $ 0.12 $ 0.43 (72.1) % 739.5 742.2
Supplemental Ratios: Store operating expenses as a percentage of Company-operated retail revenues 42.4 % 41.3 % Other operating expenses as a percentage of specialty revenues 16.9 % 21.1 % Effective tax rate 33.0 % 35.9 % Segment Results The tables below present reportable segment results net of intersegment eliminations (in millions): United States Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 13 Weeks Ended As a % of US total net revenues Net revenues: Company-operated retail $ 1,602.2 $ 1,725.5 (7.1 ) % 88.8 % 89.1 % Specialty: Licensing 123.9 115.1 7.6 6.9 5.9 Foodservice and other 78.7 95.7 (17.8 ) 4.4 4.9 Total specialty 202.6 210.8 (3.9 ) 11.2 10.9 Total net revenues 1,804.8 1,936.3 (6.8 ) 100.0 100.0 Cost of sales including occupancy costs 764.3 802.0 (4.7 ) 42.3 41.4 Store operating expenses 684.0 762.1 (10.2 ) 37.9 39.4 Other operating expenses 40.7 55.5 (26.7 ) 2.3 2.9 Depreciation and amortization expenses 97.2 102.2 (4.9 ) 5.4 5.3 General and administrative expenses 21.2 19.9 6.5 1.2 1.0 Restructuring charges 106.8 - nm 5.9 - Total operating expenses 1,714.2 1,741.7 (1.6 ) 95.0 89.9 Income from equity investees - (0.7 ) nm - - Operating income $ 90.6 $ 193.9 (53.3 ) % 5.0 % 10.0 % Supplemental Ratios: Store operating expenses as a percentage of Company-operated retail revenues Other operating expenses as a percentage of specialty revenues 42.7 % 44.2 % 20.1 % 26.3 %
26 Weeks Ended Net revenues: Company-operated retail $ 3,364.0 $ 3,615.8 (7.0 ) % 88.3 % 89.0 % Specialty: Licensing 274.8 253.0 8.6 7.2 6.2 Foodservice and other 171.2 193.7 (11.6 ) 4.5 4.8 Total specialty 446.0 446.7 (0.2 ) 11.7 11.0 Total net revenues 3,810.0 4,062.5 (6.2 ) 100.0 100.0 Cost of sales including occupancy costs 1,645.2 1,674.9 (1.8 ) 43.2 41.2 Store operating expenses 1,450.4 1,527.0 (5.0 ) 38.1 37.6 Other operating expenses 88.7 114.5 (22.5 ) 2.3 2.8 Depreciation and amortization expenses 194.6 200.6 (3.0 ) 5.1 4.9 General and administrative expenses 45.8 40.4 13.4 1.2 1.0 Restructuring charges 161.2 - nm 4.2 - Total operating expenses 3,585.9 3,557.4 0.8 94.1 87.6 Income from equity investees 0.5 (0.3 ) nm - - Operating income $ 224.6 $ 504.8 (55.5 ) % 5.9 % 12.4 % Supplemental Ratios: Store operating expenses as a percentage of Company-operated retail revenues Other operating expenses as a percentage of specialty revenues 43.1 % 42.2 % 19.9 % 25.6 % International Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 13 Weeks Ended As a % of International total net revenues Net revenues: Company-operated retail $ 359.6 $ 417.4 (13.8 ) % 82.9 % 84.6 % Specialty: Licensing 64.1 63.0 1.7 14.8 12.8 Foodservice and other 10.0 13.0 (23.1 ) 2.3 2.6 Total specialty 74.1 76.0 (2.5 ) 17.1 15.4 Total net revenues 433.7 493.4 (12.1 ) 100.0 100.0 Cost of sales including 220.7 247.8 (10.9 ) 50.9 50.2
occupancy costs Store operating expenses 135.6 165.0 (17.8 ) 31.3 33.4 Other operating expenses 19.2 22.5 (14.7 ) 4.4 4.6 Depreciation and amortization expenses 23.9 26.5 (9.8 ) 5.5 5.4 General and administrative expenses 24.5 29.0 (15.5 ) 5.6 5.9 Restructuring charges 14.9 - nm 3.4 - Total operating expenses 438.8 490.8 (10.6 ) 101.2 99.5 Income from equity investees 11.1 15.2 (27.0 ) 2.6 3.1 Operating income $ 6.0 $ 17.8 (66.3 ) % 1.4 % 3.6 % Supplemental Ratios: Store operating expenses as a percentage of Company-operated retail revenues Other operating expenses as a percentage of specialty revenues 37.7 % 39.5 % 25.9 % 29.6 % 26 Weeks Ended Net revenues: Company-operated retail $ 774.0 $ 878.6 (11.9 ) % 83.3 % 85.0 % Specialty: Licensing 133.2 129.3 3.0 14.3 12.5 Foodservice and other 22.2 26.3 (15.6 ) 2.4 2.5 Total specialty 155.4 155.6 (0.1 ) 16.7 15.0 Total net revenues 929.4 1,034.2 (10.1 ) 100.0 100.0 Cost of sales including occupancy costs 472.1 507.8 (7.0 ) 50.8 49.1 Store operating expenses 305.8 327.4 (6.6 ) 32.9 31.7 Other operating expenses 36.5 43.3 (15.7 ) 3.9 4.2 Depreciation and amortization expenses 49.3 52.2 (5.6 ) 5.3 5.0 General and administrative expenses 52.9 58.9 (10.2 ) 5.7 5.7 Restructuring charges 16.9 - nm 1.8 - Total operating expenses 933.5 989.6 (5.7 ) 100.4 95.7 Income from equity investees 23.0 27.3 (15.8 ) 2.5 2.6
Operating income $ 18.9 $ 71.9 (73.7 ) % 2.0 % 7.0 % Supplemental Ratios: Store operating expenses as a percentage of Company-operated retail revenues Other operating expenses as a percentage of specialty revenues 39.5 % 37.3 % 23.5 % 27.8 % Global CPG Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 13 Weeks Ended As a % of CPG total net revenues Licensing revenues $ 94.8 $ 96.3 (1.6 ) % 100.0 % 100.0 % Total specialty revenues 94.8 96.3 (1.6 ) 100.0 100.0 Cost of sales 58.5 56.9 2.8 61.7 59.1 Other operating expenses 4.1 4.8 (14.6 ) 4.3 5.0 Depreciation and amortization expenses - - - - - General and administrative expenses 0.8 1.9 (57.9 ) 0.8 2.0 Restructuring charges 0.2 - nm 0.2 - Total operating expenses 63.6 63.6 0.0 67.1 66.0 Income from equity investees 14.1 10.0 41.0 14.9 10.4 Operating income $ 45.3 $ 42.7 6.1 % 47.8 % 44.3 % 26 Weeks Ended Licensing revenues $ 209.1 $ 196.9 6.2 % 100.0 % 100.0 % Total specialty revenues 209.1 196.9 6.2 100.0 100.0 Cost of sales 123.0 110.0 11.8 58.8 55.9 Other operating expenses 11.4 10.7 6.5 5.5 5.4 General and administrative expenses 2.9 4.0 (27.5 ) 1.4 2.0 Restructuring charges 0.2 - nm 0.1 - Total operating expenses 137.5 124.7 10.3 65.8 63.3 Income from equity investees 25.2 21.1 19.4 12.1 10.7 Operating income $ 96.8 $ 93.3 3.8 % 46.3 % 47.4 %
Unallocated Corporate Mar 29, Mar 30, % Mar 29, Mar 30, 2009 2008 Change 2009 2008 As a % of total net revenues 13 Weeks Ended Depreciation and amortization expenses $ 13.0 $ 9.4 38.3 % 0.6 % 0.4 % General and administrative expenses 57.8 66.8 (13.5 ) 2.5 2.6 Restructuring charges 30.2 - nm 1.3 - Operating loss $ (101.0 ) $ (76.2 ) 32.5 % (4.3 ) % (3.0 ) % 26 Weeks Ended Depreciation and amortization expenses $ 24.5 $ 18.5 32.4 % 0.5 % 0.3 % General and administrative expenses 107.9 140.2 (23.0 ) 2.2 2.6 Restructuring charges 49.3 - nm 1.0 - Operating loss $ (181.7 ) $ (158.7 ) 14.5 % (3.7 ) % (3.0 ) % STARBUCKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except per share data) (unaudited) ASSETS Current assets: Mar 29, 2009 Sep 28, 2008 Cash and cash equivalents $ 253.2 $ 269.8 Short-term investments - available-for-sale securities 7.8 3.0 Short-term investments - trading securities 33.5 49.5 Accounts receivable, net 309.3 329.5 Inventories 627.8 692.8 Prepaid expenses and other current assets 159.6 169.2 Deferred income taxes, net 212.9 234.2 Total current assets 1,604.1 1,748.0
Long-term investments available-for-sale securities 77.2 71.4 Equity and cost investments 310.2 302.6 Property, plant and equipment, net 2,658.0 2,956.4 Other assets 303.4 261.1 Other intangible assets 67.3 66.6 Goodwill 261.1 266.5 TOTAL ASSETS $ 5,281.3 $ 5,672.6 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Commercial paper and short-term borrowings $ 226.0 $ 713.0 Accounts payable 266.5 324.9 Accrued compensation and related costs 236.6 253.6 Accrued occupancy costs 135.9 136.1 Accrued taxes 101.6 76.1 Insurance reserves 148.3 152.5 Other accrued expenses 139.1 164.4 Deferred revenue 431.4 368.4 Current portion of long-term debt 0.5 0.7 Total current liabilities 1,685.9 2,189.7 Long-term debt 549.4 549.6 Other long-term liabilities 415.6 442.4 Total liabilities 2,650.9 3,181.7 Shareholders equity: Common stock ($0.001 par value) - authorized, 1,200.0 shares; issued and outstanding, 739.1 and 735.5 shares, respectively, (includes 3.4 common stock units in both periods) 0.7 0.7 Additional paid-in-capital 61.2 -
Other additional paid-in-capital 39.4 39.4 Retained earnings 2,491.7 2,402.4 Accumulated other comprehensive income 37.4 48.4 Total shareholders equity 2,630.4 2,490.9 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 5,281.3 $ 5,672.6 STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS OPERATING ACTIVITIES: (unaudited and in millions) 26 Weeks Ended Mar 29, 2009 Mar 30, 2008 Net earnings $ 89.3 $ 316.8 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 282.2 286.3 Provision for impairments and asset disposals 145.7 42.4 Deferred income taxes, net (29.9 ) (15.7 ) Equity in income of investees (29.6 ) (22.9 ) Distributions of income from equity investees 18.8 17.3 Stock-based compensation 42.5 39.3 Tax benefit from exercise of stock options Excess tax benefit from exercise of stock options 0.6 2.8 (5.9 ) (7.7 ) Other 16.1 (0.2 ) Cash provided/(used) by changes in operating assets and liabilities: Inventories 59.9 87.8 Accounts payable (47.3 ) (70.0 ) Accrued taxes 29.9 (53.4 ) Deferred revenue 66.9 79.8
Other operating assets and liabilities 76.2 62.5 Net cash provided by operating activities 715.4 765.1 INVESTING ACTIVITIES: Purchase of available-for-sale securities (7.0 ) (56.6 ) Maturity of available-for-sale securities - 15.3 Sale of available-for-sale securities - 75.9 Net purchases of equity, other investments and other assets Net additions to property, plant and equipment (10.7 ) (26.9 ) (236.9 ) (505.1 ) Net cash used by investing activities (254.6 ) (497.4 ) FINANCING ACTIVITIES: Repayments of commercial paper (21,335.5 ) (44,798.7 ) Proceeds from issuance of commercial paper 20,928.4 44,789.1 Repayments of short-term borrowings (1,113.0 ) - Proceeds from short-term borrowings 1,033.0 1.1 Proceeds from issuance of common stock 17.1 59.3 Excess tax benefit from exercise of stock options 5.9 7.7 Principal payments on long-term debt (0.3 ) (0.3 ) Repurchase of common stock - (311.4 ) Other (0.8 ) (0.7 ) Net cash used by financing activities (465.2 ) (253.9 ) Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents (12.2 ) 8.3 (16.6 ) 22.1 CASH AND CASH EQUIVALENTS:
Beginning of period 269.8 281.3 End of the period $ 253.2 $ 303.4 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Net repayments of short-term borrowings for the period $ (487.1 ) $ (8.5 ) Cash paid during the period for: Interest, net of capitalized interest $ 22.6 $ 27.8 Income taxes $ 47.1 $ 231.0 Fiscal Second Quarter 2009 Store Data United States: The company s store data for the periods presented are as follows: Net stores opened/(closed) during the period 13 Weeks Ended 26 Weeks Ended Stores open as of Mar 29, Mar 30, Mar 29, Mar 30, Mar 29, Mar 30, 2009 2008 2009 2008 2009 2008 Company-operated Stores (103 ) 170 (203 ) 464 7,035 7,257 Licensed Stores 12 96 82 286 4,411 4,177 International: (91 ) 266 (121 ) 750 11,446 11,434 Company-operated Stores (1) 21 73 90 163 2,069 1,906 Licensed Stores (1) 57 131 213 302 3,347 2,886 78 204 303 465 5,416 4,792 Total (13 ) 470 182 1,215 16,862 16,226 (1) International store data has been adjusted for the acquisition of retail store locations in Quebec and Atlantic Canada from former licensees Coffee Vision, Inc. and Coffee Vision Atlantic, Inc., by reclassifying historical information from
Licensed Stores to Company-operated Stores. FISCAL 2009 REVISED NET NEW STORES TARGET Company-operated new stores United States New 95 Closed (520 ) Total company-operated net United States (425 ) International New 145 Closed (85 ) Total company-operated net International 60 Total company-operated net new stores (365 ) Licensed net new stores United States 65 International 320 Total licensed net new stores 385 Total consolidated net new stores 20 Non-GAAP Disclosure In addition to the GAAP results provided in this release, the company provides non-gaap operating income, non-gaap operating margin, non-gaap net earnings, non-gaap earnings per share (non-gaap EPS), and non-gaap store operating expense as a percentage of related retail revenue (non-gaap store operating expense ratio), as well as free cash flow. These non-gaap financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-gaap operating income, non-gaap operating margin, non-gaap net earnings, non-gaap earnings per share (non-gaap EPS), and non-gaap store operating expense ratio are operating income, operating margin, net earnings, diluted net earnings per share, and store operating expense as a percentage of related retail revenue, respectively. The GAAP measure most directly comparable to free cash flow is cash flow from operations (or net cash provided by operating activities). The non-gaap financial measures provided in this release for fiscal 2009, other than free cash flow, exclude restructuring charges, primarily related to company-operated store closures and the impacts of the recent global workforce reductions. The non-gaap financial measures provided in this release for fiscal 2008 exclude costs related to the company s transformation efforts during such periods consisting primarily of charges related to slowing the pace of U.S. store openings and the associated termination of future site commitments, related inventory and store assets. Free cash flow is defined as cash flow from operations less capital expenditures (or net additions to property, plant and equipment). The company s management believes that providing these non-gaap financial measures better enables investors to understand and evaluate the company s historical and prospective operating performance. More specifically, for historical non-gaap financial measures other than free cash flow, management excludes each of those items mentioned above because it believes that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company s future operating performance or comparisons to the company s past operating performance. These non-gaap financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of the company s results as reported under GAAP. Other companies may calculate these non-gaap financial measures differently than the company does, limiting the usefulness of those measures for comparative purposes.
STARBUCKS CORPORATION RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (unaudited and in millions, except per share data) 13 Weeks Ended 26 Weeks Ended Mar 29, Mar 30, Mar 29, Mar 30, 2009 2008 2009 2008 Consolidated Operating income, as reported (GAAP) $ 40.9 $ 178.2 $ 158.6 $ 511.3 Restructuring charges 152.1-227.6 - Other transformation charges - 35.1-35.1 Non-GAAP operating income $ 193.0 $ 213.3 $ 386.2 $ 546.4 Operating margin, as reported (GAAP) 1.8 % 7.1 % 3.2 % 9.7 % Restructuring charges 6.5-4.6 - Other transformation charges - 1.3-0.6 Non-GAAP operating margin 8.3 % 8.4 % 7.8 % 10.3 % Net earnings, as reported (GAAP) $ 25.0 $ 108.7 $ 89.3 $ 316.8 Restructuring charges, net of tax 96.1-144.9 - Other transformation charges, net of tax - 22.2-22.2 Non-GAAP net earnings $ 121.1 $ 130.9 $ 234.2 $ 339.0 EPS, as reported (GAAP) $ 0.03 $ 0.15 $ 0.12 $ 0.43 Restructuring charges, net of tax 0.13-0.20 - Other transformation charges, net of tax - 0.03-0.03 Non-GAAP EPS $ 0.16 $ 0.18 $ 0.32 $ 0.46
United States Operating income, as reported (GAAP) $ 90.6 $ 193.9 $ 224.6 $ 504.8 Restructuring charges 106.8-161.2 - Other transformation charges - 28.0-28.0 Non-GAAP operating income $ 197.4 $ 221.9 $ 385.8 $ 532.8 Store operating expense ratio, as reported (GAAP) 42.7 % 44.2 % 43.1 % 42.2 % Restructuring charges - - - - Other transformation charges - (1.7) - (0.8) Non-GAAP store operating expense ratio 42.7 % 42.5 % 43.1 % 41.4 % Operating margin, as reported (GAAP) 5.0 % 10.0 % 5.9 % 12.4 % Restructuring charges 5.9-4.2 - Other transformation charges - 1.5-0.7 Non-GAAP operating margin 10.9 % 11.5 % 10.1 % 13.1 % International Operating income, as reported (GAAP) $ 6.0 $ 17.8 $ 18.9 $ 71.9 Restructuring charges 14.9-16.9 - Other transformation charges - 7.6-7.6 Non-GAAP operating income $ 20.9 $ 25.4 $ 35.8 $ 79.5 Operating margin, as reported (GAAP) 1.4 % 3.6 % 2.0 % 7.0 % Restructuring charges 3.4-1.8 - Other transformation charges - 1.5-0.7 Non-GAAP operating margin 4.8 % 5.1 % 3.9 % 7.7 % Free Cash Flow Net cash provided by operating activities Net additions to property, plant and equipment $ 715.4 $ 765.1 (236.9) (505.1)
Free cash flow $ 478.5 $ 260.0 2009 Starbucks Coffee Company. All rights reserved. Source: Starbucks Corporation Starbucks Investor Relations: JoAnn DeGrande, 206-318-7118 investorrelations@starbucks.com or Media: Deb Trevino, 206-318-7100 press@starbucks.com